A former senior manager at Australia's banking watchdog APRA is accused in a lawsuit of running an array of scams, including engineering sham payouts for his wife and ripping off the credit union that headhunted him as chief executive.

Lyndon Kingston allegedly lined his pockets by rorting expenses and taking kickbacks from uncommercial contracts before he was sacked from a job he claims entitled him to up to $1 million a year.

Key points

The credit union Lyndon Kingston ran alleges he took kickbacks from $2.5 million in dodgy contracts

Court documents claim the former APRA manager gave his wife a $340,000 "sham redundancy" and rorted expenses

It alleges Mr Kingston offered the credit union's chairman a $1.25 million consultancy to get his job back

ASIC is investigating the claims, which Mr Kingston denies

The credit union BCU has filed an explosive counterclaim to Mr Kingston's $3.4 million lawsuit in Queensland's Supreme Court, in which he alleges BCU broke his contract and still owes him bonuses.

In court documents, BCU claims its former boss "fraudulently concealed" more than $117,000 in secret commissions by doctoring paperwork sought by his previous employer, the Australian Prudential Regulation Authority (APRA).

BCU, which has 50,000 customers and a $1.4 billion loan book, claimed Mr Kingston tried to have his sacking for "serious misconduct" last October overturned by offering a $1.25 million consultancy to its chairman.

The ABC can reveal ASIC has launched an investigation into the damning claims by BCU, which said it had evidence of five acts of fraud and 12 of dishonesty by Mr Kingston during the nine years he was chief executive.

In its counterclaim, BCU alleges that Mr Kingston also gave his wife Anna a "sham redundancy" worth $345,000, then paid her another $341,000 over 18 months to do "substantially the same (albeit) less work" as a consultant.

She earned $1,000 a day for doing "at most four-and-a-half-hours a day (before any lunch or other breaks)" in between going to the gym, looking after their children and doing housework, the credit union claims in documents filed in court.

BCU also alleges the couple claimed $91,000 in bogus "living away from home" expenses after they began living with their children just 1.6 kilometres from BCU's corporate office in Brisbane in 2014.

BCU is counter-suing to recover damages, including the cost of recovering emails and documents Mr Kingston allegedly tried to wipe from five electronic devices he initially refused to return while under investigation.

In another example of alleged secret commissionsBCU claims it has emails suggesting Mr Kingston took an "equal split (of profits)" of a $300,000 recruiting contract he awarded to a company called Gaga Consulting Pty Ltd.

He ensured Gaga was paid a fee for recruiting his brother-in-law, when Gaga played no role in recruiting him, according to BCU.

Gaga's representatives then had to be trained by BCU staff in "the processes of interviewing and recruitment".

BCU alleges Mr Kingston repeatedly evaded APRA's queries about its contract with one of the companies paying him kickbacks.

Mr Kingston edited the contract and a memo to throw the regulator off the scent, according to BCU.

'Not a fit and proper person to act as CEO'

After his sacking, BCU claims Mr Kingston used a lawyer to make an "improper proposal" to BCU's chairman of a $250,000-a-year consultancy if he stood down and reinstated Mr Kingston.

This showed he was "not a fit and proper person to act as CEO" of any lender, BCU states in court papers.

He allegedly falsified his employment contract and redirected $34,000 in superannuation to boost his pay packet, one of a series of acts the credit union says left it in breach of its legal obligations.

A week after Mr Kingston filed his lawsuit, BCU sued his wife in the District Court in a bid to claw back almost half a million dollars including from the "sham redundancy".

"APRA has been working with BCU on issues associated with the proceedings, however, as it is an ongoing legal matter, it is not appropriate for APRA to provide any further comment," he said.

BCU chairman Steve Targett said the credit union was fighting Mr Kingston's lawsuit "on principle because this is not acceptable behaviour".

"We work in an industry where the members trust their credit unions, and we've had something happen that we regret but we're going to address it, and we're not afraid to make it public and deal with it upfront," he said.

"It's challenging but the bottom line is the credit union is still incredibly strong. We're well capitalised, deposits are safe and it's just something we have to work through."